Stocks in Europe closed higher on Tuesday, hitting a three-week high on the back of hopes for a trade deal between the U.S. and China.
The pan-European Stoxx 600 rose by more than 1 percent, with all major bourses and every sector except telecoms finishing in positive territory. Industrial stocks were the top performing sector with gains of 2 percent.
Investors were mostly monitoring the second day of trade talks between China and the United States. In the U.S. Tuesday, stocks surged to three-week highs after President Donald Trump tweeted that talks with China were going "very well," with the dollar also rallying after a shaky start to the year. Dow Jones reported on Tuesday afternoon that negotiators from China and the U.S. had narrowed some of their differences.
Looking across the European index, WM Morrison fell 3 percent to near the bottom of the list. The retailer missed its Christmas sales forecasts. On the other hand, Carrefour rose almost 3 percent after Bank of America upgraded the stock.
Chemicals firm Sika dropped 4 percent following news that it will buy its French rival Parex for $2.55 billion, according to Reuters. In other corporate news, Nissan's ousted Chairman Carlos Ghosn appeared before a court on Tuesday to argue against allegations of financial misconduct.
In the U.K. the focus remained on the Brexit negotiations. The Daily Telegraph reported that European officials are discussing the course of action if the U.K. were to request an extension of Article 50. The U.K. Parliament is due to vote next week on the Withdrawal Agreement, but support for the deal does not seem to have increased over the Christmas period. Meanwhile, the Irish prime minister has said that the EU could give some further written reassurances on the Irish backstop ahead of the vote.
Fears grew for Germany's economy on Tuesday, as another set of dismal industrial data fueled concern that Europe's largest economy is heading for a recession. Elsewhere, the euro zone business climate index dropped to 0.82 in December from 1.04 in the previous month, showing new signs of economic weakness in the region.